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In times of uncertainty, investors looking for safe havens often flock into gold. But how can the private investor buy gold, and what are the risks?

Renowned investor Jim Slater once commented that the best investments before a proper recession are gold bullion, tins of baked beans, and a shotgun. Having been advised that writing a article on weaponry was against editorial policy, I decided instead to take a look at buying gold.
The two main reasons for buying gold are (a) because you think it's going to rise, or (b) as an insurance policy against everything else falling. For centuries, gold has been regarded as the ultimate safe haven investment in times of trouble, and I think it's fair to say that we're living in times of trouble. Consequently, the gold dealers I spoke to have never been so busy.
As an insurance policy, the idea is to allocate a percentage of your portfolio to gold, and hope that it doesn't work. But how does the private investor do this?
The easiest way, if you live near one, is to walk into a bullion shop and buy some over the counter. ATS Bullion, for example, will sell units as small as a 1g bar (approx. £22), as well as coins and larger bars.
While this may be convenient, and satisfying as you hold the gold in your hand, it's important to remember that you'll pay a premium of a few percent above the quoted spot price, and there's a significant spread between buying and selling prices. If you intend keeping gold at home, is it covered under your contents insurance?
A more sophisticated method is to buy gold allocated in your name, but stored in a recognised bullion vault. The important point about 'allocated gold' is that you have legal title to the gold -- it does not show on the vault-owner's balance sheet, and if the vault-owner goes into liquidation your gold cannot be used to pay its creditors.
According to Paul Tustain, founder of BullionVault.com, holding legal title to the gold does not require physical segregation of the metal on an owner-by-owner basis. This means that he can provide any quantity that you require, even as little as a gram, and still ensure that the gold is owned in your name.
When held on this basis, vaults charge a fee for looking after your property. In the case of BullionVault.com, the fees and charges for a $10,000 investment over five years work out at 0.86% per annum.
A more common method is to buy gold and deposit it with a bank or other institution. This is referred to as 'unallocated gold', and the spot prices you'll see quoted for gold relate to unallocated good delivery bars.
Typically, this is cheaper to maintain, as you are not paying for storage, but legally you do not have title to the gold; the bank takes the gold onto its balance sheet as an asset, and owes you an equivalent amount as a creditor. In the event that the bank is liquidated, you'd be in the same position as somebody who had deposited money in the bank (although you might want to check whether you'd be covered by the Financial Services Compensation Scheme).
Apart from cost, there can be other advantages of an unallocated gold account. Capital Asset Group, for example, allows investors to use leverage to increase their exposure. Their minimum investment is 25oz of gold, worth about $22,000, but at maximum leverage you need only put up 20% of the value -- $4,400 -- equivalent to about £2,450.
Depending on how you want to manage the leverage, the other 80% could be earning interest in a deposit account, compensating you for the fact that physical gold doesn't pay a dividend. Leverage can be dangerous, though, so make sure you're aware of the risks.
A popular way to invest in commodities generally is through exchange-traded commodities (ETCs). Similar in ways to exchange traded funds (ETFs), these allow you to buy shares in a company whose purpose is to track the price of the underlying commodity. ETFS Physical Gold, denominated in dollars (LSE: PHAU) or sterling (LSE: PHGP), is a fund that owns gold bullion, and you can easily buy shares in this fund through your broker.
There's an important distinction here between physical ETCs, and those that invest in derivative products. Most ETCs are constructed using futures contracts, and therefore depend on the creditworthiness of counter-parties to the contracts.
In normal market conditions, this wouldn't be a problem, but these are not normal market conditions. Two weeks ago, trading in $3bn of ETCs was suspended for several days because of doubts about the viability of the formerly AAA-rated American International Group (NYSE: AIG), which provides the commodity contracts that back those ETCs. Among the shares suspended were ETFS Gold (LSE: BULL, LSE:BULP), and ETFS Leveraged Gold (LSE: LBUL), while their physical stablemate, backed by actual stocks of gold, was unaffected.
Investors can also get exposure to the price of gold using spreadbetting, or by buying shares in gold mining and exploration companies, but as with some of the methods above these do not confer any direct ownership of the metal. Professional investors also trade directly in gold futures.
If you're investing in gold as an insurance policy, the way in which you invest depends largely on your attitude to risk and your expectations about the future. What sort of risk are you trying to insure against? If it's the collapse of civilisation, then gold in a vault in Switzerland will be of little use to you -- you'll want gold in small denominations in your pocket.
Bank insolvency is obviously a greater risk, and for that reason you might want to consider who legally owns 'your' gold. But if you're more relaxed about those risks and want to benefit from any rise in gold prices, you have many more options, including the use of leverage if you're that way inclined. Either way, be sure that you know what you're buying.